With a background in economics and public policy, I've covered domestic and international energy issues since 1998. I'm the editor-in-chief for Public Utilities Fortnightly, which is a paid subscription-based magazine that was established in 1929. My column, which also appears in the CSMonitor, has twice been named Best Online Column by two different media organizations. Twitter: @Ken_Silverstein. Email: ken@silversteineditorial.com

Natural Gas Vehicles Driven to Outpace Oil

Image by Getty Images via @daylifeCall it the battle between brothers and barons: oil and natural gas, or the Koch Brothers versus Boone Pickens. Big Oil has won Round One but the supporters of a now-defeated bill to give alternatively-fueled vehicles a leg up are driven to outpace the petroleum-based competition.

Call it the battle between brothers and barons: oil and natural gas, or the Koch Brothers versus Boone Pickens. Big Oil has won Round One but the supporters of a now-defeated bill to give alternatively-fueled vehicles a leg up are driven to outpace the petroleum-based competition.

At issue is legislation that would attempt to ease the demand for foreign sources of oil by giving tax incentives worth $3.4 billion to $5 billion to those long haul trucks that convert from the traditional combustion engine to those that would run on natural gas. Making that switch comes with a cost — but one that is too high for conservative groups who say that these matters are best left to the free market.

“The tax code is riddled with subsidies that distort the market and allow the heavy hand of government to tip the scales in favor of some industries, and against others,” writes the Heritage Foundation that worked to beat back last Tuesday the NAT GAS Act.

Now that gas is $4 a gallon, Americans are clamoring for relief. Enter President Obama, who outlined his administration’s plan to ease the demand for foreign crude by increasing the use of all alternatively-fueled vehicles here during a visit to a Daimler truck factory in North Carolina.

To that end, his plan would give $1 billion to create the infrastructure to support a massive switch in the way people travel. The money would go first to select communities. Beyond that, President Obama would increase the tax grants given to buyers of alternatively-fueled vehicles from $7,500 to $10,000. The president would furthermore give a 50 percent tax credit to those 18-wheelers that switch to natural gas or electricity.

While his measure had been endorsed by Democrats and Republicans alike, it still collapsed largely along party lines. But Boone Pickens fired back and quickly tried to rally the congressional troops for Round Two. To that end, he is arguing that the tax incentives would be temporary and last only until this fledgling industry has planted its feet. He specifically criticized the Koch Brothers, essentially calling them hypocrites who have profited from a highly subsidized and politically potent ethanol industry.

Sponsors of the NAT GAS Act are saying that they will revise their measure in a way to attract the necessary votes. The good news for supporters is that a majority of the U.S. Senate voted in favor: 51 to 47. But because it was included as an amendment to a highway bill, it required 60 to pass. On the House side, meanwhile, the measure has 180 co-sponsors.

“Natural gas is cheap and abundant here in America,” says Senator Robert Menendez, D-NJ, who co-sponsored the natural gas bill with Senator Richard Burr, R-NC. “Instead of exporting this fuel abroad we should be using it right here to displace oil.”

Despite the bipartisan backing, getting the revised bill passed won’t be easy. Aside from the argument that government has no business trying to pick winners and losers, the opposition is coming from the manufacturing and chemical industries that don’t want limited fuel supplies diverted to the transportation sector. That would drive up prices at a time when those companies are starting to rebound.

To sway those heavy industries, NAT GAS Act supporters say that they would disallow the use of natural gas drilled here to be sold outside the country. Such a move, however, would draw the wrath of energy producers that have large investments here in liquefied natural gas (LNG) plants — facilities that are underutilized now because of the shale gas boom. LNG is unlikely to be targeted for use by domestic long haul trucks years from now when it could head immediately to global power markets.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Comments

America is awash with natural gas. Most experts say we have over one hundred years of readily available natural gas using today’s technologies. Natural gas is available at one seventh the cost of imported oil for the same amount of energy. Wise corporations have been transitioning from expensive imported oil to power their manufacturing plants and equipment. Companies like Cummins are rolling natural gas powered equipment off of their assembly lines. In short American industry now has an advantage over those who remain reliant on expensive foreign crude imports. Local communities that have access to natural gas are set to prosper as natural gas trucks and vehicles begin to roll off of Americas assembly lines. Three M has announced new resins that will dramatically reduce the costs of installing new natural gas fuel tanks that will further increase the range of natural gas powered vehicles. Fuel tank systems had been the most expensive component of natural gas vehicles. American innovation is alive and well. Pickens has correctly identified that the availability of natural gas on our roadways is now the only thing that is holding up the ” Golden Age of Natural Gas”. Foreign oil suppliers and ethanol interests are doing what they can to avoid irrelevancy. Congress will eventually come to the conclusion that is in the public’s interest to speed up the pace at which the public is allowed to benefit from Americas vast reserves of this this clean burning American fuel source.

GE recently signed a contract with Chesapeake energy to provide four hundred modular natural gas fuel stations. Again ,American ingenuity is alive and well. Only congress can hold up the speed at which that innovation benefits the general public.

Gas is not $4 a gallon – it is $3.838 for a gallon of regular, nationwide – up 8.4% from 1 year ago. Gas hasn’t been over $4 a gallon (nationwide) in the past 3 1/2 years. That said, natural gas vehicles seem to be the next logical step. But we can’t rely on the government to use logic when it comes to picking the winners and losers in the transportation industry. And big consumers of natural gas will be in for a world of hurt if the government dictated that natural gas should be the go-to fuel for transportation.

Here is a radical idea: don’t do anything new. No new subsidies; no pretending that battery technology will rapidly advance; no restriction of pipelines or drilling and refining permits Just let prices rise until alternatives can stand on their own – as determined by consumers.

Maybe – just maybe – this is as good as it gets. Maybe a market-driven shift over time is better than any of the schemes cooked up by the smartest guys in the room.

I would agree that free market forces should determine our direction. We currently subsidize the price of gasoline through our defense budget. If you go truly market based you must add the cost per gallon of maintaining forces in the Middle East to keep tanker lanes open.

It is my understanding that natural gas is still being flared. What a waste of energy that could help every American driver! Please support natural gas for transportation. In the years ahead it will help American competitiveness and jobs.

This Nat Gas Act has changed from previous versions in that the funding falls on the back of those who have already converted with a 18.3 cent “user fee” to fund this so it really is NOT a subsidy but I don’t think the CNG users know about this fee. I asked around and they had no idea about it.

Also, one of our main problems is the EPA restrictions of conversions. Only 2% of the vehicles purchased in the last 6 years have a “legal” kit even though there are kits for nearly 100% of the vehicles available from all around the world for much less cost. Just legalize all kits from around the world and we would not need an rebates at all to convert. The added burden of the EPA testing to get a kit certified with EPA increased the but more than that restricts who can convert. Argentina and Peru have lowered the cost to $1200 to convert to CNG there. http://www.ngvglobal.com/peru-provides-ideal-conditions-for-conversion-of-vehicles-to-cng-0214

But in the meantime, a good way to wean us off oil and the pollution that goes with it is natural gas. Think of it as methadone for oil addicts. Something that allows you to carry on while you’re in recovery.

You can still use your complicated and noisy internal combustion engines. But you won’t be polluting as much or stimilating wars in foreign lands. And natural gas is so much easier to handle. It doesn’t require extensive refining like crude oil does.

But both T. Boone and the Koch brothers are “old school” thinkers. This is a new century and a new era. And hopefuly one that will finally leave fossil fuels in the ground where they belong.

Just remember electricity has to be produced. It does not mysteriously come out of a plug.

Alternative energy is a good start. Wind, solar, tidal all need to be explored.

Presently if electric vehicles were to take off in popularity the grid would shut down, not only is there not the generating capability but the grid could not handle the load.

Alternative energy sources just can’t produce the amount of energy we will require, natural gas is an interim solution. It can replace coal as the number one source of electricity. It is cleaner and the technology is more advanced, and cheaper.

I think we are going to see carbon based fuels used for some time. We have to learn to walk before we can run and natural gas (either bio or P.Chem) is the next logical step.